Panera Bread 2006 Annual Report Download - page 59

SFAS 123R also requires that the cash retained as a result of the tax deductibility of increased in the value of share-based
payments be presented as a cash inflow from financing activity in the Consolidated Statement of Cash Flows, whereas, in
prior periods, these amounts were presented as an operating activity.
As of December 26, 2006, the Company had one active stock-based compensation plan, the 2006 Stock
Incentive Plan (“2006 Plan”), and had options and restricted stock outstanding (but can make no future grants) under
three other stock-based compensation plans, the 1992 Equity Incentive Plan (“1992 Plan”), the Formula Stock
Option Plan for Independent Directors (“Formula Plan”) and the 2001 Employee, Director, and Consultant Stock
Option Plan (“2001 Plan”).
2006 Stock Incentive Plan
In March 2006, the Company’s Board of Directors adopted the 2006 Plan, which was approved by the Company’s
stockholders in May 2006. The 2006 Plan provides for the grant of up to 1,500,000 shares of the Company’s Class A
Common Stock (subject to adjustment in the event of stock splits or other similar events) as incentive stock options, non-
statutory stock options, restricted stock, restricted stock units and other stock-based awards. As a result of stockholder
approval of the 2006 Plan, effective as of May 25, 2006, the Company will grant no further stock options, restricted stock
or other awards under the 2001 Plan or the 1992 Plan. The Company’s Board of Directors administers the 2006 Plan and
has sole discretion to grant awards under the 2006 Plan. The Company’s Board of Directors has delegated the authority to
grant awards under the 2006 Plan, other than to the Company’s Chairman and Chief Executive Officer, to the Company’s
Compensation and Stock Option Committee (“Committee”).
Long-Term Incentive Program
In the third quarter of 2005, the Company adopted a Long-Term Incentive Program as a sub-plan under the 2001
Plan and the 1992 Plan. In May 2006, the Company amended the Long-Term Incentive Program to provide that the
Long-Term Incentive Program is a sub-plan under the 2006 Plan (“LTIP”). Under the LTIP, certain directors, officers,
employees, and consultants, subject to approval by the Committee, may be selected as participants eligible to receive a
percentage of their annual salary in future years, subject to the terms of the 2006 Plan. This percentage is based on the
participant’s level in the Company. In addition, the payment of this incentive can be made in several forms based on the
participant’s level including performance awards (payable in cash or common stock), restricted stock, choice awards of
restricted stock or stock options, or deferred annual bonus match awards. For the fiscal year ended December 26, 2006
and December 27, 2005, compensation expense related to performance awards, restricted stock, and deferred annual
bonus match was $1.7 million and $1.6 million, respectively.
Performance awards under the LTIP are earned by participants based on achievement of performance goals
established by the Committee. The performance period relating to the performance awards is a three-fiscal-year
period. The performance goals, including each performance metric, weighting of each metric, and award levels for
each metric, for such awards are communicated to each participant and are based on various predetermined earnings
and operating metrics. The performance awards will be earned based on achievement of predetermined earnings
and operating performance metrics at the end of the three-fiscal-year performance period, assuming continued
employment. The performance awards range from 0% to 300% of the participants’ salary based on their level in the
Company and the level of achievement of each performance metric. The performance awards will be payable 50%
in cash and 50% in common stock unless the Committee otherwise determines. For the fiscal years ended
December 26, 2006 and December 27, 2005, compensation (income) expense related to the performance awards
was ($0.2) million and $1.0 million, respectively.
Stock options under the LTIP are granted with an exercise price equal to the quoted market value of the
Company’s common stock on the date of grant. In addition, stock options vest over five years and must be exercised
within six years from date of grant.
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PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)